How the forex, gold and index markets work
- How currency pairs are quoted, and what moves them
- Why gold and indices behave differently from currencies
- The trading sessions, and when markets are busiest
Forex: trading one currency against another
Currencies trade in pairs. In EURUSD at 1.1650, one euro (the base currency) costs 1.1650 US dollars (the quote currency). Buying EURUSD means buying euros and selling dollars. Forex is the world's largest market, trading trillions of dollars a day, mostly between banks.
- Majors: pairs with the US dollar and another big currency (EURUSD, GBPUSD, USDJPY, AUDUSD, USDCAD, USDCHF, NZDUSD). Tightest spreads.
- Crosses: pairs without the dollar (EURGBP, GBPJPY).
- Exotics: a major against a smaller currency (USDZAR, USDTRY). Wider spreads, bigger jumps.
Currencies are moved mainly by interest rates, inflation, growth data and risk mood. A central bank raising rates usually supports its currency.
Gold (XAUUSD)
Gold is priced in dollars per ounce. It often rises when real interest rates fall, when the dollar weakens, or when investors look for safety. It moves much more in dollars per day than most currency pairs, so lot sizes must be smaller for the same risk.
Stock indices
An index tracks a basket of company shares: US30 (Dow Jones), NAS100 (Nasdaq 100), US500 (S&P 500), GER40 (DAX). Indices react to company earnings, interest rates and the economy, and they move fastest around the stock market open.
The trading day: three sessions
| Session | Roughly (London time) | Character |
|---|---|---|
| Asia (Tokyo, Sydney) | 00:00–08:00 | Quieter, ranges common; yen and Aussie pairs move |
| London | 08:00–16:30 | The busiest session; big moves and breakouts |
| New York | 13:30–22:00 | US data and the US stock open; overlap with London is the most active time |
Forex trades from Sunday evening to Friday evening. Indices and gold follow their own hours set by your broker, with a short daily break.
- Trading exotic pairs as a beginner and paying wide spreads.
- Using the same lot size on gold as on EURUSD.
- Trading the quiet Asian hours with a breakout strategy built for London.
Check yourself
- A pair quotes how much of the second currency buys one unit of the first.
- Gold and indices move more per day: size them down.
- London and the London–New York overlap are where most moves happen.